Safeway shareholders OK sale to Albertsons; closures may follow

A merger between the Safeway and Albertsons supermarket chains could mean closures for Southern California Albertsons and Vons stores. This Vons outlet is at 25850 The Old Road in Stevenson Ranch.
File Photo

Safeway shareholders on Friday approved the company’s $9.2 billion sale to Albertsons, a deal that comes amid fierce competition for the combined supermarket chains from a host of foes and could mean closures for Southern California stores.

About 96 percent of the outstanding shares of Safeway were voted in favor of the merger at a meeting at Safeway’s headquarters in Pleasanton.

The deal still needs to clear a review by the Federal Trade Commission, which could require Safeway or Albertsons, or both, to divest some stores for competitive reasons. But Safeway spokesman Brian Dowling said, “We don’t expect any stores to close as a result of the transaction.”

Safeway has 251 stores throughout the Bay Area and Northern California, while Albertsons doesn’t have any in the Bay Area, according to the websites of the two retailers.

“Safeway is a much stronger name in Northern California,” said David Livingston, a Milwaukee-based retail analyst. “Safeway tends to do much better than Albertsons, which was doing poorly before this.”

If any stores are closed, they are likely to be in Southern California, where Safeway brand Vons operates. Albertsons has about 181 stores in the Southland, while Vons has 279.

“Albertsons is a very important, major player in Southern California, and you might see an overlap there with Vons,” said Robert Reynolds, a Moraga-based retail analyst.

The deal will create a network of more than 2,000 stores, 27 distribution facilities and 20 manufacturing plants with more than 250,000 employees. Safeway operates 1,330 stores and Albertsons has 600-plus stores, according to the companies.

The combined Safeway and Albertsons supermarket chain will be slightly smaller than Kroger, the largest grocery retailer in the U.S., which has 2,600 stores.

Several Safeway executives will enjoy big paydays as a result of the transaction, according to proxy materials distributed for the meeting.

CEO Robert Edwards will receive $25.3 million in merger-related compensation, as well as a $4 million severance package, and former CEO Steven Burd will receive $7.5 million in stock.

It’s unclear how the merger will impact Safeway’s popular loyalty card program, which provides discounts to repeat customers.

“Safeway’s overall pricing strategy is very dependent on the loyalty cards,” Reynolds said.

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The combined Safeway and Albertsons will face stiff competition.

“Wal-Mart and others will continue to push into the market,” Livingston said. One shareholder who attended the meeting, James Patterson of San Francisco, said he hopes the new supermarket company will lean heavily toward the Safeway model for how the stores will operate.

“The Albertsons stores that I have visited in Southern California are very small, cluttered and claustrophobic,” Patterson said after the meeting. “The Safeway stores are a very good shopping experience. They are open and very inviting.”